Why India should pull Sri Lanka out of China’s debt trap ‘and bring it closer to the US
Why India should pull Sri Lanka out of China’s debt trap ‘and bring it closer to the US

Why India should pull Sri Lanka out of China’s debt trap ‘and bring it closer to the US

Sri Lanka should move closer to the United States and resolve its ongoing crisis. Despite all the Rajapaksas giving cold shoulder to the International Monetary Fund’s offer of help, it is with diplomatic assistance from India that Sri Lanka must direct the ties with the United States.

On April 12, Sri Lanka declared default on all payments on its external debt of 51 billion. USD to buy oil and agricultural products. The alarming level of food scarcity in the country has mobilized the population to demand the removal of President Gotabaya Rajapaksa with the slogans ‘Go Gota Go’ and ‘Go Home Gota’ resounding in the streets. His decision to impose a public emergency on April 1 intensified the protests further, leading to a speedy recall four days later. On the same day, former President Maithripala Sirisena-led Sri Lanka Freedom Party decided to withdraw its support from the ruling coalition led by Mahinda Rajapaksa. So far, 42 members of the Sri Lankan parliament have withdrawn their support from the ruling coalition, including 12 from Rajapaksas’ Sri Lanka Podujana Peramuna, which has led to the government’s loss of majority.

The opposition, led by Sajith Premadasa’s Samagi Jana Balawegaya (SJB), has announced a no-confidence motion against the government while a private member’s bill to scrap the 20th Change and remove the powers of the Executive Presidency. At the same time, the party has too initiated the trial against Gotabaya. The demand to limit the president’s powers has found support from SLFP, which has demanded that the 19th Amendment is reintroduced with “added powers” to curtail the executive powers of the presidency, and an interim government is formed with all parties without the involvement of the Rajapaksa family. For his part, former Prime Minister Ranil Wickremesinghe suggested to bring a resolution in parliament that will allow the legislature to take over the public finances from the president.

After riding a major Sinhalese Buddhist wave for more than a decade, the ongoing downfall of the Rajapaksa family has changed the political dynamics of Sri Lanka. In the public imagination, the loss of legitimacy that President Gotabaya faces due to his failed macroeconomic policies, combined with accusations of dynastic corruption, has linked the ouster of the Rajapaksa family to the future political and economic stability of Sri Lanka. Nevertheless, neither Gotabaya nor Mahinda have given any indication that they are planning to leave. Instead of taking responsibility for the ongoing crisis, Mahinda tried to shift the blame for the deteriorating economy on the young people protesting against his government, proclaims that “every second you [youth] protest, we lose vital dollars. “

Also read: China ” debt trap diplomacy ‘played a role in Pakistan, Sri Lanka crises. But that is not the reason

China is rescuing

In this regard, China, the main protector of the Rajapaksa family, has become wary of rescuing its former allies. As the economic situation in Sri Lanka worsened with the onset of the pandemic in March 2020, China initially came to the rescue by providing $ 1 billion in loans. Subsequently, it also provided $ 1.5 billion in a currency swap deal. The consistent rise in anti-China sentiment among the Sinhalese Buddhist majority forced Beijing to reconsider the usefulness of its support for the Rajapaksa family.

While Mahinda had consistently exploited Sinhalese majority sentiment to dominate national politics, the failure to curb anti-Chinese sentiment in the Sinhalese south created concerns in China about its future investments in the country. After the Rajapaksa government cancelled the Chinese hybrid energy projects in northern Sri Lanka, apparently under Indian pressure, the Chinese felt further aggravated. During his visit to the island in January, Chinese Foreign Minister Wang Yi made a point of demanding “equal negotiations”With the country, without“ third party ”interference. He also remained uncommitted to a $ 3.5 billion request in “favored” trade credit for Chinese exports to Sri Lanka.

Repair tape, but with caution

China’s reluctance to restructure Sri Lankan loans and the setbacks by Sinhalese Buddhist leaders forced the Rajapaksa brothers to direct ties to India. Thus, in August 2021, Sri Lanka sent a new High Commissioner in New Delhi after holding the post vacant for 18 months. It also announced the “integrated country strategy” for India. Along with promoting trade and investment, the strategy also sought to strengthen religious ties and Buddhist exchanges and to hand over a sacred “Sita temple stone” from Sri Lanka to Ram Mandir in Ayodhya. Rajapaksas’ turn towards India yielded rapid yields. After a series of high-profile visits, the latter delivered a $ 2.4 billion financial package in preferential loans and lines of credit. In return, Sri Lanka made progress with Indian projects such as the Western Container Terminal (WCT) and the Trincomalee oil farm.

In a time of persistent economic hardship, India’s support for Sri Lanka has earned a huge amount of goodwill. New Delhi decision sending 11,000 tonnes of rice on the eve of the Tamil and Sinhalese New Year is also a step in the right direction. But India’s aid to the people of Sri Lanka should not result in the support of the Rajapaksa family. After losing popular legitimacy, their political future is shaken at best. Therefore, if New Delhi continues to make an agreement with them, it will only prolong the difficulties that the people of Sri Lanka are facing. The solution to the country’s current economic woes is only possible if the Rajapaksa family leaves room for the caretaker government. In this regard, the disagreement in the opposition in Sri Lanka is a significant factor behind the confidence of the Rajapaksa brothers even in the face of mass protests. But if the situation continues to worsen, the Narendra Modi government will have to host thousands of Sri Lankan refugees in Tamil Nadu. This makes it sensible for India to play a significant role in ensuring political stability in Sri Lanka.

Also read: The role China played in pushing Sri Lanka into a debt trap and what India can do to help

Make Sri Lanka look west

At the same time, given India’s own economic situation and the scale of Sri Lanka’s economic crisis, it is impossible for the Modi government to continue to finance the island’s food and oil purchases. Therefore, India also needs to pressure Sri Lanka to improve its ties with the US. Historically, the Rajapaksa brothers have shown great stubbornness in accepting support from the International Monetary Fund (IMF). Also in 2020, when the country began to face a balance of payments crisis, its leaders refused to accept help from the IMF. Due to its pro-China stance, the Sri Lankan government refused The $ 480 million Millennium Challenge Corporation grant offered by the United States. In addition, under Gotabaya’s presidency, Sri Lanka has criticized Quad as an “exclusive military alliance” with the potential to lead to a Cold War in the Indo-Pacific. But after defaulting on its external loans, Sri Lanka now has no choice but to accept IMF assistance.

After burning many bridges with the United States under the arrogance of the Rajapaksa family, Sri Lanka now needs diplomatic support from India to navigate the ongoing economic crisis. This gives the latter a strategic opportunity to pull the island out of Beijing’s ‘debt trap’ and bring it closer to the United States, as its interests remain in line with the Indo-Pacific. This would also allow New Delhi to retain its influence in future dispensations in Colombo.

Shrey Khanna is a staff research analyst working on the Indo-Pacific program at Takshashila Institution. He tweets on @Shreywa. Views are personal.

(Edited by Humra Laeeq)

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